Mutually beneficial trades may not occur under moral hazard.

Name: Mutually beneficial trades may not occur under moral hazard.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Moral hazard can create an asymmetry of information between parties in a trade, which can lead to one party taking on excessive risk or shirking responsibility knowing that the other party is protected against losses. This can undermine the trust and incentives necessary for mutually beneficial trades to occur.

Mutually Beneficial Trades May Not Occur Under Moral Hazard